Hong Kong a gateway for ‘new economy’ listings, says China investment bank

China Renaissance, one of the leading independent investment banks in the country, predicts Hong Kong will soon establish itself as the gateway for "new economy" entrepreneurs from the mainland to expand globally.

Bao Fan, the founder and chief executive of technology-focused China Renaissance, said these entrepreneurs are driving "a new generation of internet-enabled business models that are rapidly disrupting many segments of traditional industries", including finance, transportation, retail, media and health care.

The Beijing-based investment bank, which has advised on about US$8 billion worth of major mergers and acquisitions in China's buoyant telecommunications, media and technology market, yesterday announced the expansion of its equities business for institutional clients in the city, a service previously available only to its customers in the United States.

"Hong Kong is an integral part to the success of China's capital markets, and we expect to see more and more companies choose to list on the Hong Kong stock exchange rather than in the United States in the future," said Gloria Lu, the head of equities at China Renaissance.

The city, however, may still be smarting from the snub by Hangzhou-based Alibaba Group for its initial public offering last year. The world's biggest e-commerce company eventually decided to list on the New York Stock Exchange, where it was able to raise US$25 billion in the largest IPO in history.

Lu said the latest wave of entrepreneurs in China's fast-developing internet industry can benefit from the current regulatory framework and listing rules in Hong Kong. "The city is efficient and does not have restrictions like the VIE," she said.

The VIE, or variable interest entity, refers to a structure that allows a mainland company - such as Alibaba - to form a new corporation abroad that can get listed overseas. That entity remains linked with the mainland firm through certain agreements.

Bao said the Shanghai-Hong Kong stock connect and the upcoming Shenzhen-Hong Kong stock connect programme "could potentially raise the overall valuation of the local market". That could entice not only the mainland's next-generation internet companies to go public and raise money in Hong Kong, but also convince US-listed mainland internet companies to have a dual listing here, he said.

Ben Kwong Man-bun, a director of brokerage KGI, said last Friday that Hong Kong "investors are preparing for improving market conditions after a short-lived consolidation in the stock market".

China Renaissance, which also has offices in Shanghai and New York, has completed 191 private placements and raised about US$9.5 billion of capital since it was founded in 2004.